Trump's moves to boost diesel supplies have not yet lowered prices
Despite efforts by President Trump to alleviate diesel supply pressures through diplomatic channels and tax incentives, US diesel prices have remained stubbornly high, surging 70% amid ongoing geopolitical tensions. This persistent inflation in energy costs reflects broader economic fragility and raises concerns about stagflation, which may inhibit the Federal Reserve's inclination to cut interest rates any time soon. Investors are closely monitoring how these dynamics will evolve, especially as high energy prices typically bolster the dollar's safe-haven appeal.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The persistence of energy price pressures, as highlighted in this context, keeps our outlook on the USD cautiously optimistic.
How firms align
JPMorgan's target of 1.10 aligns well with the overall narrative of rising USD strength amidst supply pressures. Conversely, BofA's more bearish outlook at 1.04 reflects a cautious approach to potential risks from high energy prices against economic growth forecasts.
What the data shows
Recent research indicates that escalating energy prices could restrain Fed rate-cut expectations, reinforcing a bullish USD outlook. For further insights, refer to /research/energypricingimpact.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Persistent high diesel prices pose inflationary risks, supporting safe-haven USD.
- 02FX traders should monitor energy market developments closely.
- 03Risks of stagflation could delay Fed rate cuts, affecting market positioning.
- 04Watch for geopolitical developments that may further influence energy prices.
Market implications
Next week, traders should keep an eye on energy price fluctuations and their potential impact on USD positioning, especially if prices breach crucial levels. Key economic data releases will also provide additional context for rate expectations.
Risks to this view
A significant change in energy supply dynamics, such as a resolution to geopolitical tensions, could swiftly reverse the current bullish sentiment on the USD. Additionally, unexpected economic data suggesting resilience could shift focus away from stagflation fears.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.35
Sources & References
How we cover this story